BK Menu Gives Casual Dining Reason to Worry

CHICAGO (AdAge.com) -- Soon, the troubled casual-dining industry won't just be worrying about its nearest competitor -- Burger King could be closing in as well with a new slate of premium items, including ribs and thicker burgers.

"These up-market products are going to meet with great reception, great value for the money perceptions, and they cook out beautifully on the new equipment," CEO John Chidsey said on a recent earnings call with investors. "We have license as Burger King to be in the business of thicker burgers, products like ribs, and I won't go any further because there are still some that are under wraps."
Burger King CEO John Chidsey
A Burger King franchisee who is not participating in the tests said that options are still being tested, and it's too early to say what the specific offerings will be.

But it's not just about ribs. Russ Klein, BK's president-global strategy, said the products are about expanding the chain's "barbell" menu strategy with a variety of both low- and higher-price items. "Value for the money also comes with premium products that are on par with casual dining that are available for a fraction of the price," he said. "So, we work the value for the money equation on both ends of our menu."

Less eating out
It's a great time to go after casual dining. Many of the segment's once-unstoppable industry darlings such as Cheesecake Factory and Applebee's have fallen on hard times. While Burger King posted a 5% increase in third-quarter same-store sales, Applebee's fell 3% and Cheesecake Factory dropped 5%. And most industry watchers aren't expecting them to recover anytime soon. The November RBC Restaurant Survey indicates that restaurant sales are expected to continue decelerating through year-end. As of early November, 49% of consumers surveyed were planning to spend less money eating out, while only 7% planned to spend more. That's the lowest rating since the study began in late 2004.

To prepare the new products, Burger King operators are adding grills and other back-of-the-house equipment, which the franchisee described as being "a significant expense" for each store.

Chris Ondrula, chief operating officer of a BK franchise company, applauds the strategy. "There's going to always be, and should always be, a value component, but reasonable minds can always differ on what reasonable means and what value means," he said. "That's where not only causal and quick-serve brands are struggling. What's reasonable, how do you define value in this market, this economy?"

Mr. Klein said about 20% of U.S. locations have the products ready to go, and 50% of U.S. locations have the batch broilers in place. He said national advertising could begin next summer, but the chain has no plans to pull back on value-menu advertising. The company's agency is Crispin Porter & Bogusky, Miami. "We're going to continue to drive against higher quality and innovation, which are better values for the money than one can find in casual dining as well," said Mr. Klein.

The additions aren't without their difficulties. McDonald's McRib sandwich is a sales driver for the chain, but has never graduated from limited-time status. Spokeswoman Danya Proud described the customer following as "unique." Darren Tristano, exec VP at Technomic, said ribs are particularly appealing to African-Americans and younger consumers looking for something spicy. "But what we've learned about ribs is it's not something people are looking for every day," he said. "It tends to be more appealing to men vs. women, and the messy part makes it a little more difficult to grab and go."

McDonald's is also testing a bigger burger, the Angus, in Southern California, New York and Columbus, Ohio. The chain has yet to decide on a wider test or national rollout.